Welcome to Flostock - Demand Forecasting in Volatile Markets

The Construction Cycle in the Netherlands (Source: CBS)

Modeling the Dutch Housing market

Report "Forecasting Model for the Dutch Housing Market"

Flostock and Buildsight have developed a new forecasting model for the Dutch Housing market. This model is able to forecast – for the first time ever- the construction cycle and the turning points of this industry. Besides the housing production, the model forecasts the housing price (with turning points!) and the number of transactions in the market. The principles behind the model have been developed by Flostock in cooperation with Eindhoven University of Technology (Operations Research, School of Industrial Engineering ), and in projects with a series of renowned companies in the chemical and semi-conductor industries. The model makes dynamic connections between various streams of long term demographic developments and therefore provides a realistic, non-linear view that reaches more than 10 years into the future.

The model can on request be adapted to focus on smaller segments of the market (e.g. Amsterdam or Groningen only), for testing government policy (e.g. the impact of changes to the maximum Loan-to-Value), for calculating demand for raw materials, mortgages, furniture etc. We are looking for partners to develop similar models for other countries.

The model outcome was presented at the Buildsight day in June 2016. A comprehensive report (in Dutch) is now available in print. Contact Flostock if you want to order a copy or go directly to the Buildsight webiste.

The model forecasts that the construction industry in the Netherlands will collapse if the builders expand their capacity and supply the full demand peak we are in right now. We have written an article about this in Cobouw, online magazine for the construction industry.

New method of Demand Forecasting based on Drivers, including Key Economic Indicators

The Flostock model calculates your demand starting from key economic indicators in the macro economy such as the construction of houses, the GDP or Car sales. Whether you are an upstream supplier to automotive, to retail or to the IC industry: your demand is ultimately driven by the consumption in the downstream end market.

The upstream demand is modified by additional drivers like the inventory behavior of the supply chain, which too is influenced by variables such as interest rate and price. By capturing drivers like inventory behavior and relevant economic indicators in a model, the innovative concept of Flostock makes it possible to translate the macroscopic economic indicators for the end market to your upstream demand. For many key economic indicators reliable extrapolations already exist, which makes it possible to create a reliable forecast for your demand. If the Drivers included represent at least 90% of the causes of the Demand, forecasting at a good accuracy level becomes possible.

More info about our company is available. Visit Products & Services or review our Publications for an explanation of our revolutionary Stock & Flow method.

Stocks are big compared with Flows

What is different from all others?

Others create a forecast based on a statistical, numerical analysis of the flow in the past. As a result, their forecast is always linear, maybe with some repeated seasonality, but without bending and turns. In a stable business this might be good enough, but in a volatile business (and which business nowadays is not volatile?) the challenge of forecasting lies in understanding and foreseing the irregular turning points.

Flostock models are causal: they calculate the effect that each stock has on the flow. And "stock" includes not only inventory, but also e.g. capacity. Most people ignore stocks, or assume they are not influencing their business much. We have found that stocks can have a huge impact and are the main cause of waves, bullwhips and oscillations. The Flostock models are the only type of models that can re-generate these irregular waves.

Our promise

A good demand forecast allows for trend analysis and an optimal response to volatile demand. Flostock has developed pioneering software that accurately predicts the effect of changing stock levels throughout the supply chain. This is the first time that data from both upstream and end-use markets have been brought together in one business model to support companies in demand forecasting.

Inventories in the supply chain (the connection between a company and its end market) can have a much bigger effect on demand than most theories say. Flostock’s supply chain models are able to include these effects, showing a high level of accuracy that allows production and logistics planning to be optimized and business results to be maximized.

The model can determine and analyze between stock building, the development of end-use demand and market share changes, and represents a fundamental change in the way industry stock movements are forecasted and analyzed.

Lehman Wave

Flostock is a spin-off from a project between Royal DSM and Eindhoven University of Technology

In August 2009 an early version of the Flostock model generated the blue Demand Forecast curve in the picture on the right for the Royal DSM business segment of coating resins used in "Joinery". The dotted line is the end market. The red curve is the actual sales curve realized since then. The astonishing forecast accuracy was reason for R.Peels to start Flostock and make these forecasts available for the industry. This project has been evaluated and published by DSM again in February 2014 and it appeared that the wave did take place as predicted untill 2012, so more than 3 years into the future.

Flostock Summary

Flostock is a new consultancy with a concept that is so unique it already has been described in series of journals and newspapers, including the Financial Times and ICIS Chemical News. Our insights have been adopted in the curriculum of Wharton, MIT, and at least 6 European universities. McKinsey recently called our approach best practice in the crisis. We cooperate closely with the operations research department of Eindhoven University in the Netherlands. Our specialty is Volatility.